Oh christ on a cracker.
Mainstream economists should have all taken their PhD diplomas off their walls and collectively shredded them in the fall of 2008.
Under the watchful eyes of mainstream economists at the Federal Reserve, the watchful eyes of academics at institutions worldwide, the global financial system melted down.
Now, we are to believe that these same folks who couldn't see the 2008-2009 crisis know exactly how to lead us out.
"Almost nobody predicted the immense economic crisis that overtook the United States and Europe in 2008. If someone claims that he did, ask how many other crises he predicted that didn’t end up happening."
http://www.nybooks.com/articles/archives/2014/oct/23/why-wer...
Then read hedge fund billionaire Druckenmiller's transcript linked in this article below.
http://www.bloomberg.com/news/articles/2015-04-10/druckenmil...
Then read about billionaire Ray Dalio here:
http://www.newyorker.com/magazine/2011/07/25/mastering-the-m...
Krugman didn't 2008-2009 coming. Many people did.
I think QE + ZIRP saved us from a catastrophe in 2008-2009. Instead of thinking what got us to a point where such heavy-handed financial tools were necessary and moving away from the cliff, we've just used the QE tool over and over again. QE1,2,twist,3. QE in Japan. QE in Europe. The Chinese have yet to openly go down this path.
I don't in any way believe that Krugman knows what is coming. (I don't either.)
That very situation is what Krugman did a lot of his academic work on. So far it's played out mostly like what he and other mainstream economists predicted. You can always say "until it doesn't", but that's the nature of life. We have to go with what we know.
It's not as if Krugman wants QE + ZIRP; he'd rather get out of it ASAP with his actual policy prescription (fiscal policy), but he's had to settle for QE/ZIRP.
> Yet there are many economists, myself included, who regard this view [that QE will be effective and give us a strong recovery] as highly unrealistic, yet support more aggressive Fed action all the same. Why? First, because it might help and is unlikely to do harm. Second, because the alternative — fiscal policy — may be of proven effectiveness, but is also completely blocked by politics. So the Fed’s efforts are all we have.
http://krugman.blogs.nytimes.com/2013/07/27/miltons-paradise...